econ test 2 practice quizzes

"Net foreign factor income" in the national income accounts refers to the difference between the _____. a) income Americans gain from supplying resources abroad and the income that foreigners earn by supplying resources in the U.S. b) value of products sold by Americans to other nations and the value of products bought by Americans from other nations. c) value of investments that Americans made abroad and the value of investments made by foreigners in the U.S. d) income earned by Americans in the U.S. minus the income earned by foreigners in the U.S.

a

A nation's average annual real GDP growth rate is 5%. Based on the "rule of 72," the approximate number of years that it would take for this nation's real GDP to double is a) 14.4 years. b) 12.5 years. c) 16.2 years. d) 10 years.

a

If a nation's real GDP increases from 100 billion to 106 billion and its population jumps from 200 million to 212 million, its real GDP per capita will a) remain constant. b) fall by 6%. c) rise by 6%. d) fall by 12%.

a

Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2, except that business inventories increased by $10 billion. GDP in year 2 is _____. a) $210 billion b) $200 billion c) $190 billion d) $180 billion

a

Suppose that inventories were $40 billion in 2012 and $50 billion in 2013. In 2013, national income accountants would _____. a) add $10 billion to other elements of investment in calculating total investment b) subtract $10 billion from other elements of investment in calculating total investment c) add $45 billion (= $90/2) to other elements of investment in calculating total investment d) subtract $45 billion (= $90/2) from other elements of investment in calculating total investmenta

a

The selection of which point on the production possibilities frontier is most likely to result in the largest increase in economic growth over time? (look at pic #3 on phone) a) Point 1 b) Point 2 c) Point 3 d) Point 4

a

To increase future living standards by pursuing higher current rates of investment spending, an economy must a) reduce current rates of consumption spending. b) allow higher rates of current consumption. c) reduce the current capital stock. d) decrease the amount of future research and development spending.

a

What do government purchases include in national income accounting? a) Purchases by federal, state, and local governments b) Purchases by the federal government only c) Government transfer payments d) Purchases of goods for consumption but not public capital goods

a

When a firm builds a new factory, this is an example of an investment in a) physical capital. b) the market. c) human capital. d) research and development.

a

Which measure of inflation would include consumer goods and capital goods? a) the GDP Price Index b) the Consumer Price Index c) the Retail Trade Survey d) the Employment Cost Index

a

A trough in the business cycle occurs when a) cyclical unemployment is at a minimum point. b) employment and output reach their lowest levels. c) the natural rate of unemployment is at a minimum point. d) the inflation rate is at its lowest level.

b

Consumption of fixed capital (depreciation) can be determined by _____. a) adding net investment to real GDP b) subtracting net investment from gross investment \ c) subtracting net investment from real GDP d) subtracting depreciation from net investment

b

Curve (a) is the current frontier for the economy. Focusing on curve (a), point N suggests that the economy currently produces (look at pic #2 on phone) a) more goods for the future than at point P. b) less goods for the future than at point P. c) less goods for the present than at point P. d) a combination of output that is less than its potential.

b

Economic growth is best represented by a (look at pic #4 on phone) a) move from Z to X along AB. b) move from X on AB to Y on CD. c) shift of the production possibilities frontier from CD to AB. d) move from X to Z along AB.

b

GDP can be calculated by summing _____. a) consumption, investment, government purchases, exports, and imports b) consumption, investment, government purchases, and net exports c) consumption, investment, wages, and rents d) consumption, investment, government purchases, and imports

b

If an economy produces 100 pencils and 100 pens, and pencils sell for twice as much as pens, _____. a) pencils are weighted as equally important in the economy as pens b) pencils are weighted as twice as important in the economy compared to pens c) pens are weighted as twice as important in the economy compared to pencils d) nothing can be said about the relative importance of pens and pencils in the economy

b

If labor market institutions change so that it becomes easier to find a job, and unemployed people are unemployed for smaller durations of time, what would happen to the natural rate of unemployment? a) It would increase. b) It would decrease. c) It would remain the same, since the number of workers has not changed. d) There is not enough information to determine what would happen.

b

In the expenditures approach of national income accounting, C, I, and G include expenditures for _____. a) domestically-produced goods and services only b) domestically-produced, as well as imported, goods and services c) exported goods and services d) the private sector of the economy only

b

Nominal GDP is _____. a) the sum of all monetary transactions that occur in the economy in a year b) the sum of all monetary transactions involving final goods and services that occur in the economy in a year c) the amount of production that occurs when the economy is operating at full employment d) money GDP adjusted for inflation

b

Nominal GDP is the market value of _____. a) resources (land, labor, capital, and entrepreneurship) in an economy in a given year b) all final goods and services produced in an economy in a given year c) all consumption and investment spending in an economy in a given year d) all output produced and accumulated over the years

b

Suppose Canada has a population of 30 million people and a labor force participation rate of 2/3. Furthermore, suppose the natural rate of unemployment in Canada is 7%. If the current number of unemployed people is 1.4 million people, what can we conclude about Canada's economy? a) The unemployment rate is above the natural rate of unemployment. b) There is no cyclical unemployment present in the economy. c) The unemployment rate is below the natural rate of unemployment. d) There is cyclical unemployment present in the economy.

b

Suppose there are two economies, Alpha and Beta, that have the same production possibilities frontiers. If Beta devotes more resources to produce capital goods than consumer goods as compared to Alpha, then in the future a) Alpha will experience greater economic growth than Beta. b) Beta will experience greater economic growth than Alpha. c) Alpha will not be able to achieve full employment or productive efficiency. d) Beta will not be able to achieve full employment or productive efficiency.

b

The "rule of 72" is a formula for determining the approximate number of a) years that it would take for a value (like real GDP) to expand 72 times. b) years that it would take for a value (like real GDP) to double. c)times a value (like real GDP) is a multiple of 72. d) times one could double a certain value (like real GDP) over 72 years.

b

The principle that if the amount of labor and other inputs is held constant, then the greater the amount of capital in use, the less an additional unit of capital adds to production is called the principle of a) increasing average capital productivity. b) diminishing returns to capital. c) increasing returns to capital. d) decreasing output per unit of capital.

b

The unemployed are those people who a) do not have jobs. b) are not employed but are seeking work. c) are not working. d) are not in the workforce.

b

The unemployment rate in an economy is 6%. The total population of the economy is 290 million, and the size of the civilian labor force is 150 million. The number of unemployed workers in this economy is a) 6 million. b) 9 million. c) 12 million. d) 24 million.

b

The value of corporate stocks and bonds traded in a given year is _____. a) included in the calculation of GDP because it is a component of gross investment b) excluded from the calculation of GDP because it does not represent new production c) included in the calculation of net private domestic investment d) included in the calculation of gross private domestic investment

b

Use the following table to answer the next question. Year Alta Zorn Alta Zorn (Real GDP) (Population) 1 $2,000 $150,000 200 500 2 2,100 152,000 202 505 3 2,200 154,000 210 508 Between years 1 and 2, real GDP per capita grew by approximately __________ percent in Alta. a) 3 b) 4 c) 5 d) 10

b

Use the following table to answer the next question. The base year is 2007. look at phone The Consumer Price Index for the year 2008 is a) 180.5. b) 171.5. c) 147.5. d) 126.5.

b

Which of the following is not a component of gross investment? a) The purchase of a new drill press by the Ajax Manufacturing Company. b) The purchase of 100 shares of AT&T by a retired business executive. c) Construction of a suburban housing project. d) The piling up of inventories on a grocer's shelf.

b

Which of the following is the correct way to calculate the unemployment rate? a) (unemployed/population) x 100 b) (unemployed/labor force) x 100 c) (labor force/population) x 100 d) (labor force/unemployed) x 100

b

Which of the following measures the changes in the prices of a "market basket" of some 300 goods and services purchased by typical urban consumers? a) the GDP Price Index b) the Consumer Price Index c) the Retail Trade survey d) the Wholesale Price Index

b

Year Nominal GDP Real GDP Price Index 1 5,200 4,800 -- 2 5,500 -- 112 3 5,750 5,000 -- What is the GDP price index in year 1? a) 105.2 b) 108.3 c) 109.6 d) 111.5

b

human capital is a) the factories and machinery used by humans in the production process. b) the talents, training, and education of workers. c) the financial resources available to humans for investment. d) the factories and machinery made by workers.

b

A nation's average annual real GDP growth rate is 3%. Based on the "rule of 72," the approximate number of years that it would take for this nation's real GDP to double is a) 175 years. b) 40 years. c) 24 years. d) 17.5 years.

c

Curve (a) is the initial frontier for the economy, and the nation is initially producing combination P. A shift from curve (a) to curve (b) suggests that the economy can then increase its production of capital goods (look at phone) a) only if it reduces its production of consumer goods. b) so as to produce the combination L. c) and consumer goods simultaneously, except at the point where the curve intersects the vertical axis. d) but will have to hold constant its production of consumer goods.

c

GDP tends to overstate economic well-being because it takes into account _____. a) all of the illegal activities conducted by organized crime in the economy b) spending on intermediate goods that are used to produce final goods c) total spending to deal with the adverse health effects of some products d) the personal labor time that car owners spend working on car repairs and maintenance of their vehicles

c

If real GDP per person was equal to $2,000 in 1900 and grew at a 1 percent annual rate, what would be the value of real GDP per person 100 years later? a) $2,210 b) $4,000 c) $5,410 d) $20,000

c

Net foreign factor income is _____. a) the income people in foreign countries receive from resources owned domestically b) the income people in a country receive from resources owned in foreign countries c) the difference between the income people in a country receive from resources owned in foreign countries and the income people in foreign countries receive from resources owned domestically d) the difference between the values of a country's exports and imports

c

Over a 10-year period, the Consumer Price Index doubled. On the basis of this information and using the rule of 72, we can say that the average annual rate of inflation over this period was approximately a) 10%. b) 9%. c) 7%. d) 5%.

c

Real GDP per capita is a a) better measure of personal material consumption than output. b) worse measure of personal material consumption than output. c) better measure of the physical environment than output. d) worse measure of the physical environment than output.

c

Suppose there are 10 million part-time workers and 90 million full-time workers in an economy. Five million of the part-time workers switch to full-time work. As a result, the a) official unemployment rate will fall. b) official unemployment rate will rise. c) official unemployment rate will remain unchanged. d) size of the labor force will increase.

c

The consumption of fixed capital in each year's production is called _____. a) indirect business taxes b) inventory reduction c) depreciation d) net investment

c

The cost of a higher living standard in the future is giving up a) current investment. b) future investment. c) current consumption. d) future consumption.

c

The presence of discouraged workers a) increases the size of the labor force but does not affect the unemployment rate. b) reduces the size of the labor force but does not affect the unemployment rate. c) may cause the official unemployment rate to understate the true amount of unemployment. d) may cause the official unemployment rate to overstate the true amount of unemployment.

c

The recurrent ups and downs in the level of economic activity extending over several years are referred to as a) economic phases. b) business startups. c) business cycles. d) noncyclical fluctuations.

c

The total population of an economy is 175 million, the labor force is 125 million, and the number of employed workers is 117 million. The unemployment rate for this economy is a) 3%. b) 5%. c) 6%. d) 7%.

c

Use the following table to answer the next question. The base year is 2007. look at second table pic The Consumer Price Index for the year 2007 is a) 200. b) 150. c) 100. d) 50.

c

Which of the following is an example of an intermediate good? a) A pair of skis sold by a sporting goods retailer to a skier b) A share of IBM stock c) The lumber produced by Boise Cascade and sold to a builder of old houses d) An antique car sold to the highest bidder

c

n year 1, the Consumer Price Index was 120 and the average nominal income was $30,000. In year 2, the Consumer Price Index was 125 and the average nominal level of income was $32,000. What happened to real income from year 1 to year 2? a) It fell by $400. b) It rose by $400. c) It rose by $600. d) It rose by $2,000.

c

Consumers in an economy buy only three general types of products, A, B, and C. Changes in the prices of these items over a period are shown below. look at phone Using year 1 as the base year, the country's Consumer Price Index in year 2 is a) 100.00. b) 103.75. c) 105.25. d) 106.25.

d

Economic growth can best be portrayed as a(n) a) inward shift of the production possibilities frontier. b) movement from a point inside to a point outside of the production possibilities frontier. c) movement from a point near the vertical axis to a point near the horizontal axis on the production possibilities frontier. d) outward shift of the production possibilities frontier.

d

Environmental pollution is accounted for in _____. a) GDP b) PI c) DI d) None of these

d

In the expansion phase of a business cycle the inflation rate decreases, but productive capacity a)increases. b) the inflation rate and productive capacity decrease. c) employment increases, but output decreases. d) employment and output increase.

d

The U.S. produces and sells millions of different products. To aggregate them together into a single measure of domestic output, the quantity of each good produced is weighted by its _____. a) cost of production b) utility to consumers c) contribution to corporate profits d) market price

d

The inflation rate measures the percentage growth rate of a) real GDP from the base period 1982-84 to a given year. b) real GDP from one year to the next. c) the CPI from the base period 1982-84 to a given year. d) the CPI from one year to the next.

d

The most likely cause for a shift in the production possibilities frontier from AB to CD is (the line shifter outwards) a) the use of the economy's resources in a less efficient way. b) an increase in the spending of business and consumers. c) an increase in government purchase of the economy's output. d) an increase in the quantity and quality of labor resources.

d

Usually an abundance of natural resources ______ labor productivity. a) has no effect on b) doubles c) decreases d) increases

d

When gross investment is positive, net investment _____. a) is always zero b) must be negative c) must be positive d) may be either positive or negative

d

Which of the following statements is correct? a) For a given real interest rate, the nominal interest must decrease if expected inflation increases. b) For a given nominal interest rate, the real interest will decrease if inflation decreases. c) For a given expected inflation rate, the nominal interest must increase if real interest decreases. d) For a given real interest rate, the nominal interest must increase if expected inflation increases.

d